After sitting out the merger game for three years while fellow Wisconsin banks got bigger and bigger, Marshall & Ilsley Corp. appears to be back in the fight.

Late Monday the $26 billion-asset Milwaukee banking company unveiled a $250 million deal for National City Bancorp, a $1.2 billion-asset business-oriented company in Minneapolis. The deal, scheduled to close by the end of October, would boost M&I's presence in the very city in which rival Firstar Corp. transplanted itself after buying U.S. Bancorp in February.

M&I has picked up several technology companies in recent years to bolster one of its main units, the processing firm Metavante, but the National City deal would be its most significant expansion of banking operations since its April 1998 acquisition of $1.1 billion-asset Advantage Bancorp in Kenosha, Wis.

The deal is a "natural extension" into the Minneapolis market, M&I's chief financial officer, Mark Furlong, said in an interview. For the immediate future, the company said it would focus on business banking in the Minneapolis market, but it does not rule out making a push into retail banking in the region.

M&I's announcement Monday comes just one month after it agreed to buy 11 Arizona branches from Cincinnati-based Fifth Third Bancorp. "They are back in the acquisition game after being out for some time," said Brian Harvey, an analyst at Fox-Pitt Kelton. "It fits their mold of doing smaller acquisitions in adjacent markets."

M&I would gain access to National City's specialty in lending to small- and middle-market businesses. The deal includes National City's asset-based lending affiliate, Diversified Business Credit Inc., and its more than $300 million in loans to middle- market firms. That would be a new business line for M&I, which currently has a loan production office, a leasing office, and a commercial real estate office in the Minneapolis area.

National City also operates a trust company with $900 million of assets under management.

But the business-oriented focus was the main attraction in the deal. Through Diversified Business Credit, M&I said, it hopes to cross-sell its existing customers on business banking. James Wigdale, chairman and chief executive officer of M&I, said the unit has "demonstrated significant expertise" in lending to businesses.

Mr. Furlong said M&I has been operating in Minneapolis for about 10 years and jumped at the opportunity to get into asset-based lending. "It was a great fit on the commercial lending side," said Mr. Furlong, who came to M&I in April from Old Kent Bancorp in Grand Rapids, Mich. "They have some niche expertise. This will be a chance where we bring over a lot more expertise."

In addition, by entering the Minneapolis market at this time, M&I could gain customers who leave the new U.S. Bancorp, analysts said. The city was left reeling three years ago when San Francisco's Wells Fargo & Co. acquired Norwest Corp. and moved the headquarters to the West Coast. Analysts said the U.S. Bank-Firstar transaction could create an opening for opportunistic newcomers in the Minneapolis market.

"There will be some falloff from the merger," Mr. Harvey from Fox-Pitt said.

M&I said it plans to keep National City employees and its board intact after the purchase closes.

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